| The lessee
recently advised the REIT that it has incurred, and expects to continue
to incur, substantial losses from the leasing and operation of the REIT�s
hotels. For the year ended December 31, 2000, the lessee reported a net
loss of approximately $2.4 million.
The lessee advised the REIT that economic conditions
in a number of the REIT�s markets have led to decreased hotel revenues
and increased hotel operating costs. Hotel revenues have been negatively
affected by intense new competition in several markets as well as by higher
energy costs which have reduced transient travel.
Hotel operating costs have increased due to increased
utility costs and labor costs. As a result, the lessee has advised the
REIT that, without a substantial reduction in the rent paid to the REIT
under the leases, the lessee will be unable to continue to lease and operate
the REIT�s hotels.
It is anticipated that the committee of directors
will explore alternatives available to the REIT, including but not limited
to (i) formation of taxable REIT subsidiaries under the recently enacted
REIT Modernization Act which permits taxable subsidiaries of the REIT to
act as lessee of the REIT�s hotels and engage third party management companies
to manage the hotels, (ii) amendments to the existing leases to reduce
the rent paid by the lessee to the REIT or to make other changes, and (iii)
the sale of certain of the REIT�s hotels.
Based on preliminary information received from
the lessee, the REIT believes these matters could result in a substantial
decline in the REIT�s funds from operations and net income.
As a result, the REIT�s board of directors does
not expect the REIT to maintain its current monthly dividend rate beyond
its previously announced $.077 per share monthly dividend payable on April
30, 2001 to shareholders of record on March 30, 2001. |
|
Humphrey Hospitality Trust, Inc.
Created in August 1994, Humphrey Hospitality Trust, Inc.
has focused on owning and acquiring limited-service hotels that have strong
national franchise affiliations in the upper economy market segment. Since
its Initial Public Offering in November 1994, the company has:
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Acquired 86 hotels for approximately $196 million.
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Developed one hotel for approximately $3 million.
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Increased the number of rooms by over 5,500 to 6,385 through
acquisition and development.
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Completed three follow-on common stock offerings in July
1995, December 1996 and April 1998.
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Secured $45.5 million in Line of Credit Financing.
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Completed $10 million in renovations within portfolio
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Increased the annualized common dividend from $.60 per share
to $.924
Objectives
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Humphrey Hospitality Trust�s objectives are simple:
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Maximize Shareholder Value
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Increase Funds from Operations Per Share
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Safeguard Future Dividends
Strategies to achieve the objectives
Operating Strategies (through Humphrey Hospitality Management,
Inc.):
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Operate limited service hotels with multiple franchises throughout
the country, primarily in secondary and tertiary markets which are attractive
and economically healthy.
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Improve the properties physically to enhance competitive
position and curb appeal.
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Market the properties to enhance revenue growth, occupancy
levels, average daily rates and customer loyalty.
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Manage the properties in a professional, clean and efficient
way.
Acquisition & Development Strategies:
Seek to acquire quality branded limited service hotels
in secondary or tertiary markets Selectively expand hotels in markets experiencing
high occupancy
Maintain high investment return hurdles (after improvement
expenditures)
Finance Strategies
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Finance growth through selective use of
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Issuance of Operating Partnership Units
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Long term debt financing
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Equity financing
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Cash flow
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Maintain a conservative debt to lender value below 55%
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Seek to achieve a debt coverage ratio of 3-1
Divest hotels with limited long-term growth potential
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